The Reserve Bank of India (RBI) has updated its Domestic Money Transfer (DMT) rules, which will be effective from November 1, 2024. These changes align with improvements in banking services, payment systems, and KYC procedures.

RBI in a circular dated 24 July, 2024 said, “There has been significant increase in the availability of banking outlets, developments in payment systems for funds transfers, and ease in fulfilling KYC requirements etc., since then; and now users have multiple digital options for funds transfer. A review was recently undertaken of various services facilitated in the current framework.”

Advertisement

The revised regulations are created to improve the security of domestic money transfers and ensure compliance with existing financial laws. As digital and cash-based transactions continue to evolve, these measures aim to provide a strong and secure framework for fund transfers within India.

Changes in Domestic Money Transfer Framework

Enhanced Record-Keeping for Cash Pay-Outs

Under the new rules, remitting banks must now keep records of the name and address of beneficiaries for cash pay-out services. This change aims to improve traceability and accountability in cash transactions.

Stringent KYC Requirements for Cash Pay-Ins

– For cash pay-in services, banks and business correspondents are required to register remitters using a verified cell phone number and a self-certified ‘Officially Valid Document (OVD)’ according to the Master Direction – Know Your Customer (KYC) Direction 2016. This step is meant to tighten identity verification and reduce the risk of fraud.

– Every transaction by a remitter will now need to be validated through an Additional Factor of Authentication (AFA). This security measure is intended to further protect transactions and confirm the legitimacy of the parties involved.

– Remitting banks must comply with the provisions of the Income Tax Act, 1961, regarding cash deposits. The new framework also requires banks to include remitter details in the IMPS/NEFT transaction messages and to identify cash-based remittance transactions with a specific identifier.

Also Read: RBI to Banks: Declare Loan Accounts as ‘Fraud’ Only After Fair Hearing

Exclusion of Card-to-Card Transfers

The updated guidelines do not cover card-to-card transfers, which will continue to be governed by existing regulations specific to these types of transactions.

Since the Domestic Money Transfer framework was introduced in 2011, there has been significant growth in banking outlets and advancements in payment systems.

With easier KYC compliance and the rise of digital payment options, the RBI’s latest changes are designed to improve security and ensure compliance with existing financial laws.

Want to learn the art and science of managing your money? The 1% Club can help. Details here